“With our economy teetering on the brink of a double-dip recession, and American families still struggling during peak driving season, this is the one tool America has at her disposal to immediately help drive down prices at the pump,” said Rep. Edward J. Markey (D-Mass.), who has been calling on Obama to release some of the reserves.
Republicans took the opposite view.
June 23 (Bloomberg) -- Fadel Gheit, an analyst at Oppenheimer & Co., talks about the International Energy Agency's announcement today that it will release 60 million barrels of oil from emergency stockpiles to alleviate possible shortages following the loss of Libyan crude.
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“The Strategic Petroleum Reserve was designed for energy emergencies, not political convenience,” Rep. Fred Upton (Mich.), chairman of the Energy and Commerce Committee, said in a statement. “Releasing our reserves to calm the market is emblematic of an administration whose energy policy is irrational and counterproductive.”
Upton renewed his call for opening up more federal land for additional domestic drilling.
House Speaker John A. Boehner (R-Ohio) said Obama was “using a national security instrument to address his domestic political problems.”
Tim Miller, spokesman for GOP presidential candidate Jon Huntsman Jr., said that tapping the reserves “will provide little to no relief for Americans at the pump. The federal government needs to pursue — and should have been pursuing — a comprehensive energy policy that removes bureaucratic regulations, increases domestic drilling, encourages new technology, and expands the use of nuclear energy and natural gas.”
By late April, the president’s economic advisers, led by National Economic Council Director Gene Sperling, had come to view a release as a buffer against financial speculation, which many people blamed for high oil prices, administration officials said.
By early May, Obama decided that he probably would tap the energy reserves, but was concerned about the reaction of major oil-export nations, especially Saudi Arabia. If it viewed the U.S. action as something at odds with Saudi goals, the kingdom could slash its output and drive prices back up.
So Obama initiated a series of secret diplomatic meetings, dispatching Deputy Treasury Secretary Neal Wolin, deputy national security adviser Michael Froman and Deputy Energy Secretary Daniel B. Poneman to Saudi Arabia, the United Arab Emirates and Kuwait. The president also made calls to Saudi King Abdullah and other Arab leaders to enlist their support, administration officials said.
In early June, the Organization of the Petroleum Exporting Countries met and deadlocked over whether to increase quotas for the cartel members. Afterward, however, Saudi Arabia said it would increase output to meet the needs of the global oil market. Obama administration officials said they expected Saudi Arabia and a few other exporters to raise supplies by about 1.5 million barrels a day.
On Thursday, the administration said it would consider taking additional steps to bring down the price of oil at the end of the 30 days. But it did not say what those steps might be.
“The U.S. stands ready to do more, and if necessary, to address this issue,” the administration official said.
Energy Secretary Steven Chu said that “as we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.”
Recent data on the nation’s economic recovery have been grim, with the unemployment rate around 9 percent. This month gasoline prices have eased, but from record levels in many parts of the country. The increase in oil supply could bring some relief to motorists.
U.S. and IEA officials said that unrest in Libya has taken 140 million barrels off the market so far this year, virtually all of it the high-quality type of oil that is easiest to refine and turn into gasoline. The IEA said that “although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011.”
Some analysts said the effect of the oil-reserve release will be short-lived.
“It’s important to put 60 million barrels into context,” said Pavel Molchanov, an oil analyst with Raymond James. “This is less than one day of global oil demand, currently near 87 million barrels a day. It is also less than the oil volumes shut in in Libya over a two-month period.”
Moreover, Molchanov said, “the war in Libya has already lasted more than three months and shows few signs of ending anytime soon.”
But Goldman Sachs said the international stockpile release could reduce its forecast of crude oil prices by $10 to $12 a barrel over the next three months, and by $5 to $7 a barrel in 2012.
The Strategic Petroleum Reserve was created in 1973 after Arab oil nations refused to export to the United States in an embargo. It now contains 727 million barrels of oil in four storage sites in Louisiana and Texas.
The government has released oil from the reserve at least four times in the past – after Hurricane Katrina in 2005, to reduce the budget deficit in the mid-1990s, during the 1991 Persian Gulf War, and during a test sale in 1985.
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